Food News

Stalk Market

When the price of wheat soars, there are winners (Oregon grain growers) and losers (you).

By Tom Colligan May 19, 2009 Published in the June 2008 issue of Portland Monthly

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Image: Andy Potts

BUYERS of Grand Central Baking Company’s popular Como loaf probably have noticed that they don’t get as much bread for their buck anymore. In December, the company raised the wholesale price of its most popular product by 12 percent—a move Grand Central’s management agonized over, but eventually was forced to make. These days, the dough its bakers knead into their crusty, hand-shaped loaves contains more than a pinch of reality—namely, the global shortage of wheat.

Over the past 16 months, the large quantities of milled white wheat flour the company buys have tripled in price, from around $14 per 100-pound bag to a staggering $47. Whereas in 2005, the bakery spent $280,000 per year on its single most important raw ingredient, this year it will likely spend in excess of $1 million. “Bakers are reeling,” says Ben Davis, Grand Central’s president.

Davis since has become an avid follower of global wheat markets. He searches the pages of Milling & Baking News each week, hoping for some sign of relief. After two years of drought in Australia, and floods and drought in the European Union (both major wheat-growing regions), global stores of wheat are at their lowest levels in 30 years, while U.S. stores are at the lowest levels since 1937. This shortage comes at a time when demand, especially from Asian countries—where a growing middle class can afford to buy more food—
continues to increase.

But while consumers and companies that buy wheat products are suffering from sticker shock, the rising prices have become a boon to sectors of Oregon’s agricultural economy. Last year, the total volume of grain exports from the Pacific Northwest—mostly wheat—set an all-time record, and Oregon wheat growers (at least for now) are reaping the financial rewards they have long struggled to sow.

“We were lucky to sell wheat for a lot of money last year,” says Kevin Porter, a farmer in Oregon’s top wheat-producing county, Umatilla, and the acting president of the Oregon Wheat Growers League. In 2006, total sales of Oregon wheat—the state’s third-most-valuable agricultural crop behind grass seed and hay—hit $193 million. Last year, that figure jumped to $360 million, as growers sold their wheat for an average price of $7.70 a bushel—about twice the average selling price of the preceding 12 years.

Oregon farmers also happen to be uniquely positioned to respond to Asian demand, not just because of their proximity to an export hub, but also because the main variety of wheat grown in Oregon is one that Asian countries value: Our soft white wheat isn’t used to make risen bread like Grand Central’s Como, but it is perfect for making, say, ramen noodles and Middle Eastern-style flat breads. As such, 85 to 90 percent of our wheat is sold overseas.

But any urge farmers may have to revel in the glow of recent profits has been tempered by tough realities inherent to their business. (Yes, that feel-good agrarian way of life one imagines while perusing booths at local farmers markets is romanticized.) Dan Steiner, a grain marketing specialist at the wheat co-op Pendleton Grain Growers, notes that “these huge swings in price are incredibly stressful.” Because buyers expect prices to fall from recent highs, they now are taking a wait-and-see approach to placing orders. That, in turn, makes it hard for farmers to secure contracts for future crops.

The high prices also provide argumentative ammunition to D.C. legislators trying to slash funding for the Farm Bill, which provides federal subsidies to Oregon wheat growers. (Last year, they received just under $25 million in federal grain subsidies.) “People hear these prices and think we’re getting rich,” says Porter, who points out that this year’s prices simply make up for a 12-year period when production costs exceeded the selling price. “All we’re doing in a year like this is paying down our debt.”

And thus, the business of growing food remains just what it always has been: a volatile enterprise ruled by events beyond a farmer’s control. But considered in the context of the global market, those amber waves of grain that have so potently symbolized the hand of God reaching down to bless America’s fertile soil now also symbolize the (invisible) hand of Adam Smith.

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